Various costs are incurred by both merchandising and service businesses. Both may hire employees, both may need equipment in order to be in business and both types of business structures have customers who pay for goods or services. The main difference between a merchandising company and a service industry company is that the merchandising company must stock inventory.

Merchandise

A merchandise business sells merchandise. Good examples of merchandising businesses include retail clothing, grocery stores and bookstores. Many people use the term "widget" to refer to any merchandise a business offers for sale when discussing business issues and dynamics. For example, a sale in which a customer receives two widgets for the price of one may refer to any type of merchandise. It could mean two pairs of shoes for the price of one or two boxes of pasta for the price of one.

Service Industry

A service business sells things that are not tangible. A service company does not stock inventory, but it may need to stock tools and supplies. For example, a gardener comes to mow the lawn for a fee. He is selling a service. He may need to supply his own lawnmower, which is a cost of doing business. A maid sells the service of cleaning houses, but she may or may not need to bring her own cleaning supplies. After selling a service, there is no widget to pack up.

Online Businesses

Online businesses may be either merchandising or service businesses. A customer buys a book online via a merchandising business. The online bookstore needs to stock the book somewhere before mailing it to a customer. Another customer buys the service of having her manuscript edited by a professional book editor. They send each other PDF files via email, so the business is transacted online. The customer is not buying a widget but the service of having her manuscript improved.

Restaurant Industry

The restaurant industry is an example of a business that sells both widgets and service. Restaurants are categorized as merchandising businesses because without the food there is no business. But many restaurants also sell the service of being waited on. Customers pay the bill for their food and tip the waitress for her service.

About the Author

Samantha Hanly is an organic vegetable gardener, greenhouse gardener and home canner. She grows a substantial portion of her family's food every year. After receiving her bachelor's degree, Hanly embarked on a career teaching dramatic arts, arts and crafts, and languages. She became a professional writer in 2000, writing curricula for use in classrooms and libraries.